Anthem continues $47B Cigna takeover battle

Anthem continues $47B Cigna takeover battle

Health insurance giant Anthem (ANTM) on Monday reiterated support for its $47.4 billion cash and stock takeover bid for Cigna (CI), undeterred by the smaller rival’s rejection of the latest offer. Indianapolis-based Anthem also tried to build Cigna shareholder support for the proposed transaction, webcasting a conference call with Wall Street analysts to discuss the deal terms.

The latest jockeying in what could be the largest-ever U.S. health insurance merger came as rating agency Standard & Poor’s placed the credit rating of both firms on its CreditWatch with negative implications. S&P cited concerns the transaction would be complex, lengthy and involve a “potentially high degree of integration risk.” If finalized, the deal would create the largest U.S. player in the commercial insurance market, the largest player in the Medicaid market and the third-largest player in the Medicare market.

The ongoing takeover battle sent stocks of both firms higher in Monday afternoon trading. Anthem shares were up 4.23% at $172.04, while Cigna shares were up 5.45% at $163.72. Anthem said the overall transaction — one of several potential health insurance sector mergers — is valued at nearly $54 billion, including debt, and represents a 35.4% premium based on Cigna’s May 28 share price.

The deal would drive cost synergies of nearly $2 billion within two years of finalization by generating operating synergies as well as general and administrative expense savings, Anthem said. The company also predicted the transaction would generate at least $17 in adjusted earnings per share by 2018. “We believe this is the best value transaction for both companies, customers and shareholders,” Anthem CEO and President Joseph English said during the conference call with financial analysts. Anthem’s response came after officials of Bloomfield, Conn.-based Cigna on Sunday characterized the latest takeover bid “inadequate and not in the best interests of Cigna’s shareholders.”